A July 25, 2017 New York Times article (Canada Debates Whether Gift of Leibowitz Photos Is Also a Tax Dodge, by Sopan Deb and Colin Moynihan) discussed the acquisition of 2,070 photographs by American portrait photographer Annie Liebovitz and their donation to the Art Gallery of Nova Scotia.
Since the 2013 transactions, the Canadian Cultural Property Export Review Board has ruled on three applications and is in the midst of the fourth. The article notes that one concern appears to be the valuation of the collection, appraised at $20 million, compared to the $4.75 million for which they were acquired by the donor from the photographer. The Board has granted status to 762 of the prints, at a value of $1.6 million. The Board’s determinations are based on factors including artistic value, aesthetic qualities, and the work’s association with Canadian history.
Comments-The donor would typically be entitled to a donation receipt for the full value of the donated works, although this can be restricted for tax shelter gifting arrangements (Subsections 248(35) through (38)). Donations of Canadian Cultural Property permit tax on any capital gains on the property to be avoided (Subparagraph 39(1)(a)(i.1)) and reduce exposure to the “gifting arrangement” provisions (Paragraph 248(37)(c)). The Canadian Cultural Property Export Review Board determines whether the property is Canadian Cultural Property and also determines its value as a donation.
GIFT OF A LIFE INSURANCE POLICY
In a May 18, 2017 Technical Interpretation (2017-0692361C6, Johnstone, Alexander), CRA opined that the adjusted cost basis of an interest in a life insurance policy is generally a reasonable proxy for the “cost” of an interest in the policy for the specific purpose of determining the fair market value of a donated life insurance policy (Subsection 248(35) and (36)) where the property is acquired less than three years before the gift is made.